Mortgage lenders are going head-to-head in a new price war and the battle to offer Britain’s lowest rate is heating up fast.
But while rates are now dipping below 3.8 per cent, the best deals come with strict conditions.
Lloyds Bank currently holds the lowest rate on the market, offering a two-year fix at 3.69 per cent, but only to Club Lloyds account holders.
The deal comes with a £999 product fee and a 40 per cent deposit requirement, and is exclusive to existing or new Club Lloyds members.
Meanwhile, Barclays has launched a 3.75 per cent two-year fix for Premier customers, available from today. To qualify, borrowers must earn at least £75,000 or hold £100,000 in savings or eligible investments with the bank.
The deal, which includes an £899 fee, is also restricted to those buying a property with at least a 40 per cent deposit.
GETTY | Mortgage price war heats up as Barclays cuts interest ratesBarclays is also offering a 3.76 per cent version of the deal for non-premier customers, which now stands as the lowest widely available two-year fix open to all borrowers.
The flurry of cuts has triggered responses across the high street.
Santander and Halifax now offer 3.79 per cent two-year fixes to borrowers with 40 per cent deposits.
HSBC is offering a 3.83 per cent deal for remortgage customers at the same equity level, and a 3.82 per cent fix for 60 per cent loan-to-value customers with a £999 fee.
For five-year deals, Lloyds again leads for Club Lloyds members at 3.84 per cent, while HSBC offers 3.91 per cent for Premier Standard account holders or 3.94 per cent more widely.
The price war comes alongside new Government-backed reforms aimed at making mortgages more accessible.
Chancellor Rachel Reeves has announced that renters with a strong payment history may soon be able to use their rental record to prove affordability, potentially removing the need for a deposit. She also confirmed plans to make the mortgage guarantee scheme permanent.
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PA | Barclays is also offering a 3.76 per cent version of the deal for non-premier customers
In parallel, the Bank of England has loosened lending limits by raising the cap on high loan-to-income mortgages, from 10 per cent to 15 per cent of new lending.
According to Bank estimates, this change could enable 36,000 more high LTI mortgages annually.
Nationwide has also lowered its minimum income threshold for first-time buyers from £35,000 to £30,000, potentially opening the market to 10,000 additional borrowers.
All this comes against a backdrop of economic pressure. Inflation rose to 3.6 per cent in the year to June, still well above the Bank of England's two per cent target, while interest rates remain on hold at 4.25 per cent.
Despite this, the average two-year fixed mortgage rate has now dropped to 4.68 per cent, and five-year fixes average 4.97 per cent, according to Uswitch — the first time this year that both averages have fallen below five per cent.
Aaron Strutt of Trinity Financial said: "It shows how keen banks and building societies are to attract borrowers. If you can get a sub-four per cent rate I still think you are doing pretty well."
NATIONWIDE/GETTY | Nationwide has also lowered its minimum income threshold for first-time buyers from £35,000 to £30,000,
He believes rates could fall further, stating: "I would not bet against rates being closer to 3.5 per cent over the coming months, but as we have seen so many times before almost anything can happen."
Nick Mendes of John Charcol remains optimistic about an August base rate cut despite inflation concerns: "The latest inflation figures were a little wobble, but given the employment figures the economy needs support. An August base rate cut is still priced in overwhelmingly."
Lewis Shaw of Shaw Financial Services urged caution: "If my mortgage deal were due to expire within the next three months, I would take action this week."